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Technology Innovations and the Volatility of Output: An International Perspective

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Abstract
This paper aims at improving the measure of how much of the business cycle can be explained by technology innovations. For this, we measure the Solow residuals and calibrate a two country real business cycle model for 19 economies. A new procedure is used to determine the elasticity of substitution between domestic and foreign goods, giving for most of the economies a higher elasticity than commonly measured. Another finding is that technology innovations explain more of the business cycle in an open economy model than in a closed economy one. The key result is that the volatility of output is higher in the simulations than in the data for most of the economies, contrarily to common belief. Cette étude vise à améliorer la proportion du cycle conjoncturel explicable par des innovations technologiques. À cet effet, nous mesurons des résidus de Solow et calibrons un modèle du cycle réel à deux pays pour 19 économies. Une nouvelle procédure est utilisée pour déterminer l'élasticité de substitution entre biens domestique et étranger, menant pour la plupart des économies à une élasticité plus élevée que la valuer standard. Un autre résultat est qu'ouvrir une économie permet d'expliquer une plus grande partie du cycle. Le résultat principal est que l'amplitude du cycle est plus forte dans les simulations que dans les données pour la grande majorité des économies, au contraire de la croyance usuelle.

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  • Christian Zimmermann, 1994. "Technology Innovations and the Volatility of Output: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 34, CREFE, Université du Québec à Montréal.
    • Handle: RePEc:cre:crefwp:34
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    Cited by:

    1. Eiriksson, Agust A., 2011. "The saving-investment correlation and origins of productivity shocks," Japan and the World Economy, Elsevier, vol. 23(1), pages 40-47, January.
    2. Zimmermann, Christian, 1997. "International real business cycles among heterogeneous countries," European Economic Review, Elsevier, vol. 41(2), pages 319-356, February.
    3. Stephen Ching & Michael B. Devereux, 2003. "Mundell Revisited: a Simple Approach to the Costs and Benefits of a Single Currency Area," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 674-691, September.
    4. Choi, Woon Gyu & Cook, David, 2004. "Liability dollarization and the bank balance sheet channel," Journal of International Economics, Elsevier, vol. 64(2), pages 247-275, December.
    5. Rangan Gupta, 2005. "Endogenous Tax Evasion and Reserve Requirements: A Comparative Study in the Context of European Economies," Computing in Economics and Finance 2005 328, Society for Computational Economics.
    6. Rangan Gupta, 2005. "Financial Liberalization and Inflationary Dynamics," Working papers 2005-31, University of Connecticut, Department of Economics.
    7. Gupta, Rangan, 2008. "Tax evasion and financial repression," Journal of Economics and Business, Elsevier, vol. 60(6), pages 517-535.
    8. Ambler, Steve & Cardia, Emanuela & Zimmermann, Christian, 2004. "International business cycles: What are the facts?," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 257-276, March.
    9. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeiträge 69-98, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 2000.
    10. Canova, Fabio & Ubide, Angel J., 1998. "International business cycles, financial markets and household production," Journal of Economic Dynamics and Control, Elsevier, vol. 22(4), pages 545-572, April.
    11. Christian Zimmermann, 1996. "Business Cycles and Exchange Rate Regimes," Cahiers de recherche CREFE / CREFE Working Papers 45, CREFE, Université du Québec à Montréal.
    12. Rangan Gupta, 2005. "Costly State Monitoring and Reserve Requirements," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 263-288, November.
    13. Alejandro Justiniano, 2004. "Sources and Propagation Mechanims of Foreign Disturbances in Small Open Economies: A Dynamic Factor Analysis," Econometric Society 2004 Latin American Meetings 148, Econometric Society.
    14. Christian Zimmermann, 2001. "Forecasting with Real Business Cycle Models," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 36(1), pages 189-203, January.
    15. Rangan Gupta, 2005. "A Generic Model of Financial Repression," Working papers 2005-20, University of Connecticut, Department of Economics, revised Jul 2005.
    16. Cook, David, 2002. "Market entry and international propagation of business cycles," Journal of International Economics, Elsevier, vol. 56(1), pages 155-175, January.
    17. Zimmermann, Christian, 1999. "International Business Cycles and Exchange Rates," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 682-698, November.
    18. Maria Bejan, 2011. "Trade Agreements and International Comovements: the Case of NAFTA (North American Free Trade Agreement)," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(4), pages 667-685, October.
    19. Gregory, Allan W. & Head, Allen C., 1999. "Common and country-specific fluctuations in productivity, investment, and the current account," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 423-451, December.
    20. Christian Zimmermann, 1995. "International Trade over the Business Cycle: Stylized Facts and Remaining Puzzles," Cahiers de recherche CREFE / CREFE Working Papers 37, CREFE, Université du Québec à Montréal, revised Aug 1997.
    21. Rangan Gupta, 2007. "Financial Liberalization and Inflationary Dynamics: An Open Economy Analysis," International Economic Journal, Taylor & Francis Journals, vol. 21(3), pages 335-360.
    22. Ravn, Morten O., 1997. "International business cycles in theory and in practice," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 255-283, April.
    23. Sifis Kafkalas & Pantelis Kalaitzidakis & Vangelis Tzouvelekas, 2012. "Tax Evasion and Public Expenditures on Tax Collection Services in an Endogenous Growth Model," Working Papers 1202, University of Crete, Department of Economics.
    24. den Haan, Wouter J., 2000. "The comovement between output and prices," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 3-30, August.
    25. Lilia Maliar & Liudmyla Hvozdyk & Serguei Maliar, 2006. "Downward Nominal Wage Rigidity: The Implications From A New-Keynesian Model," Working Papers. Serie AD 2006-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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    More about this item

    Keywords

    open economy macroeconomics; real business cycle models;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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